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TMI Blog2015 (5) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules - Decidedin favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... imary and important raw-material for generation of electricity as held by this Court in the case of Bhushan Power and Steel Limited Vs. State of Orissa, (2012) 56 VST 50 (Orissa). Hence, coal is exigible to entry tax at concessional rate in terms of Rule 3(4) of OET Rules. The Assessing Authority has grossly failed to appreciate the judgment rendered by this Court in Bhushan Power and Steel Limited (supra) including the other judgment in NALCO in [W.P.(C) No.1597 and 1686 of 2012] relied upon by the petitioner before the Assessing Authority. Decision of this Court in Bhushan Power and Steel Limited (supra) holding that coal is a raw-material for the purpose of generating electricity has not been followed by the Assessing Authority on the ground that such finding of this Court is a cursory remark, i.e., Obiter Dicta and the said judgment having been challenged before the Hon'ble Supreme Court, ratio decided in that case has no application to the present case. The above reasons given by the learned Assessing Authority for not following the decision of this Court is impermissible in law. 4. Coal has been mentioned as an item required to be purchased for generation of electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OET Rules. Referring to the counter affidavit filed in another connected case, Mr. Kar submitted that in the present case, since generation of electricity is not a manufacturing activity and coal is not a raw material for generation of electricity, the petitioner is not entitled to avail the concessional rate of entry tax in terms of Rule 3(4) of OET Rules. In support of his contention, Mr. Kar relied upon the decision of the Hon'ble Supreme Court in the case of Union of India vs. Ahmedabad Electricity Co. Ltd. and others, (2004) 134 STC 24 (SC). 8. On the rival contentions of the parties, the following questions fall for consideration by this Court. (i) Whether generation of electricity is a manufacturing activity? (ii) Whether electricity is an article/a good as referred to in Section 2(28) of the OVAT Act which defines the expression "manufacture"? (iii) Whether coal is a raw-material for generation of electricity in thermal power station? (iv) If the answers to question (i), (ii) and (iii) are affirmative whether the petitioner is entitled to avail concessional rate of entry tax on coal in terms of Rule 3(4) of the OET Rules? 9. Question No.(i) is whether ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance is brought into existence or a new different article having distinctive name, character or use results from a particular process or a particular activity." 16. In Collector of Central Excise, Madras Vs. M/s. Kutty Flush Doors & Furniture Co. (P) Ltd., (1988) Suppl. SCC 239 at page 240, the Hon'ble Supreme Court held as follows: "3. It may be worthwhile to note that "manufacture" implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more was necessary and there must be transformation, a new and different article must emerge having a distinct name, character or use." 17. The Hon'ble Supreme Court in the case of Collector of Central Excise, Jaipur Vrs. Rajasthan State Chemical Works, Deedwana, Rajasthan, AIR 1991 (SC) 2222 held as follows:- "….Process in manufacture or in relation to manufacture implies not only the production but the various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to (sic t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes of such property. It is needless to repeat that it is capable of abstraction, consumption and use which, if done dishonestly, would attract punishment under s.39 of the Indian Electricity Act, 1910. It can be transmitted, transferred, delivered, stored, possessed etc. in the same way as any other movable property. Even in Banjamin on Sale, 8th Edn., reference has been made at page 171 to County of Durham Electrical, etc., Co. v. Inland Revenue(1) in which electric energy was assumed to be "goods". If there can be sale and purchase of electric energy like any other movable object we see no difficulty in holding that electric energy was intended to be covered by the definition of "goods" in the two Acts. If that had not been the case there was no necessity of specifically exempting sale of electric energy from the payment of sales tax by making a provision for it in the Schedules to the two Acts. It cannot be denied that the Electricity Board carried on principally the business of selling, supplying or distributing electric energy. It would therefore clearly fall within the meaning of the expression "dealer'' in the two Acts." [Also see Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in the chemical technology of manufacture of any end-product might comprise, amongst others, of those which may retain their dominant individual identity and character throughout the process and also in the end-product; those which as a result of interaction with other chemicals or ingredients, might themselves undergo chemical or qualitative changes and in such altered form find themselves in the end-product; those which, like catalytic agents, while influencing and accelerating the chemical reactions, however, may themselves remain uninfluenced and unaltered and remain independent of and outside the end-products and those, as here, which might be burnt-up or consumed in the chemical reactions. The question in the present case is whether the ingredients of the last mentioned class qualify themselves as and are eligible to be called "Raw Material" for the end-product. One of the valid tests, in our opinion, could be that the ingredient should be so essential for the chemical processes culminating in the emergence of the desired end-product, that having regard to its importance in and indispensability for the process, it could be said that its very consumption on burn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven by the Chemical Examiner are binding upon the Department in the absence of any other acceptable evidence produced by it in rebuttal. In the present case, the Department has neither produced any evidence to rebut the reports of the Chemical Examiner nor impeached the findings of the test reports." 29. The Hon'ble Supreme Court in the case of Commissioner, Sales Tax, U.P. Vs. Bharat Bone Mill, (2007) 4 SCC 136, at page 139 held as under:- 11. Moreover, it is well-known that the question as to whether a commodity would be exigible to sales tax or not must be considered having regard to its identity in common law parlance. If, applying the said test, it is to be borne in mind that if one commodity is not ordinarily known as another commodity; normally, the provisions of taxing statute in respect of former commodity which comes within the purview of the taxing statute would be allowed to operate. In any event, such a question must be determined having regard to the expert opinion in the field. We have noticed hereinabove the difference between 'bone meal' and 'crushed bone'. Different utilities of the said items has also been noticed by the Allahabad High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not satisfy the condition of transformation from one article or another as envisaged under Rule 3(4) of the OET Rules; (g) The contention of the dealer that the coal is a raw material for the purpose of generating electricity as held by this Court in Bhusan Power and Steel Limited (supra) is not a settled ratio and it has no application to the case at hand since in that case the question before the High Court was as to whether coal is a raw material for production of iron and steel and the case was not certainly determined or adjudicated as to whether the coal is a raw material for generation of electricity. Therefore, the observation of the High Court that coal is a raw material for generation of electricity is a cursory remark, i.e., obiter dicta and the said judgment having been challenged in the Hon'ble Supreme Court and the matter is subjudice, the same is not a settled ratio, 32. For the following reasons, we feel it extreme difficult to accept the above reasons given by the Assessing Authority to hold that coal is not a raw material for generation/production of electricity in thermal power station and that generation of electricity is not a manufacturing activity a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot;; "in passing"; "incidentally". Obiter dictum is the expression of opinion stated in the judgment by a judge which is unnecessary of a particular case. Obiter dicta is an observation which is either not necessary for the decision of the case or does not relate to the material facts in issue. 35. Now, let us see whether the observation/finding of this Court in the case of Bhusan Power & Steel Ltd. (supra) that "coal is a raw material for generation of electricity" is not necessary for the decision of the case or such observation does not relate to the material facts in issue. In Bhusan Power & Steel case (supra) the petitioner was engaged in manufacturing of sponge iron, billet and H.R. Coil as well as generation of power. The petitioner's claim was that coal is required to manufacture the electricity, which is, in turn, essential to run the plant for manufacturing sponge iron, billets and HR coil. Therefore, when the electricity generation is a captive arrangement and the requirement is for carrying out manufacturing activity, the electricity generation also forms part of the manufacturing activity and the raw material used in that electricit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40. The Hon'ble Supreme Court in the case of Sri Baradakant Mishra vs. Bhimsen Dixit, (1973) 1 SCC 446, held as follows: "15. The conduct of the appellant in not following the previous decision of the High Court is calculated to create confusion in the administration of law. It will undermine respect for law laid down by the High Court and impair the Constitutional authority of the High Court. His conduct is therefore comprehended by the principles underlying the law of Contempt. The analogy of the inferior court's disobedience to the specific order of a superior court also suggests that his conduct falls within the purview of the law of Contempt. Just as the disobedience to a specific order of the Court undermines the authority and dignity of the court in a particular case, similarly the deliberate and malafide conduct of not following the law laid down in the previous decision undermines the Constitutional authority and respect of the High Court. Indeed, while the former conduct has repercussions on an individual case and on a limited number of persons, the latter conduct has a much wider and more disastrous impact. It is calculated not only to undermine the Consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the need of following judgments of the High Courts by the Assessing Officer, the Allahabad High Court has observed as under: "Indeed, the orders of the Tribunal and the High Court are binding upon the Assessing Officer and since he acts in a quasi judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore merely on the ground that the Tribunal's order is the subject matter of revision in the High Court or the High Court's decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation." 44. The Andhra Pradesh High Court in the case of State of A.P. vs. CTO, (1988) 169 ITR 564, held as under: "…if any authority or the Tribunal refuses to follow any decision of the High Court on the above grounds, it would be clearly guilty of committing contempt of the High Court and is liable to be proceeded against." 45. Needless to say that if the Tribunal and authorities functioning within the territorial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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